Seems some around here have forgotten how to think about and research a stock. The name calling and bickering demonstrates that there are some fragile egos on this board. Perhaps I can generate a discussion to divert some of the time wasting. Here is something to chew on:
I have been trying to envision what the scenarios might be after the spinoff. The first major thing will be the calling in of millions of certs. That alone should be interesting to watch because if there are truly shorts out there who are indeed without shares they would have no choice but to buy to cover. After this there are a few questions that are hard to predict.
1.What will be to OS of the new entity be (lets call it NNFA)?
2.What PPS will NNFA open at on its first day of trading?
3.Which direction will the PPS of NNFA settle up or down?
4.What will happen to the perceived value of IDSW post spinoff?
Just for the sake of ease of calculation of the pro-rata lets say the OS of NNFA happened to be set at the exact same as IDWS, 50MM. That would mean then if you own 100,000 shares of IDWS then you own 100,000 shares of NNFA after the registration.
Seems to me this would function much like a forward split. You still own exacty the same cumulative potential as you did before. Most of the speculative potential gets transferred to NNFA. The preexisting revenues would still be coming from IDWS primarily from the homeland security division.
So if revenue guidance was previously .21 EPS. That too would split. Perhaps the guidance for NNFA would now be .16 EPS leaving .05 EPS for IDWS.
In theory then if the spinoff had the same OS and opened at the exact same price then both should fall proportionally until equilibrium. This is all of course in the theoretical absence of any buying pressure. So for example if you held 100,000 shares of IDWS at .20. Then post spinoff you might hold 100,000 shares of IDWS at .07 and 100,000 shares of NNFA at .13. So pre-spinoff you had $20,000 and post spin you have $7,000 and $13,000 respectively.
This is all theoretical and proposed in a vacuum outside of market buying pressure. This could never really happen. I think NNFA would actually draw in a lot of new investors. Also you have to consider if NNFA will be PK at that point and IDWS will go OTCBB after. Or if both will then be OTCBB. I assume the move to OTCBB would happen first and then both spin into the OTCBB. The move from PK to OTC alone will increase buying pressure to at least some degree one would surmise.
Not only is there a consideration of what will happen after but what happened before. That gives an idea of the reasoning behind the spinoff. Consider this about the purpose of a spinoff:
SPINOFF BUSINESS PURPOSE: TWO IS BETTER THAN ONE
“Among the purposes listed, is facilitating a stock offering (where an equity offering is planned to raise capital for expansion, and the issuer's investment bankers attest to the fact that the offering will raise more funds per share if the separation is accomplished through the spin-off). A second notable purpose is what is popularly known as "fit and focus." The separation will enhance success, so the argument goes, by enabling the corporations to resolve problems — systemic or managerial — that arise by operation of different businesses within a single corporation or group.”
Has anyone had any experiences holding through a spinoff? Any thoughts on any of this speculation? I am completely thinking out loud here. Thoughts or experience appreciated. Educate me.
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